Monday, July 25, 2016
Christine O'Brien (Boston College - Management) has just posted on SSRN her article (forthcoming 19 U. Pa. J. Bus. L. ___) Will the Supreme Court Agree with the NLRB that Pre-Dispute Employment Arbitration Provisions Containing Class and Collective Action Waivers in Both Judicial and Arbitral Forums Violate the National Labor Relations Act – Whether There is an Opt-Out or Not? Here's the abstract:
Should employers be able to require individual employees to sign away their rights to collective action as a condition of employment? The National Labor Relations Board has held in D.R. Horton and Murphy Oil USA that when employers require employees to waive their right to “joint, class, or collective claims addressing wages, hours, or other working conditions against the employer in any forum, arbitral or judicial” as a condition of employment, this violates the NLRA. Even allowing prospective employees to opt out of such class waivers does not cure the violation in the NLRB’s view according to its decision in On Assignment Staffing Services. A circuit split has developed on enforcement of the Board’s orders on the class waiver issue with the Fifth Circuit denying the NLRB enforcement, the Seventh affirming the Board, and the Eight Circuit joining the Fifth. There are several appellate cases pending before the Ninth Circuit which has yet to fully develop its stance and approximately sixty class waiver cases pending on appeal. The Supreme Court will likely be faced with deciding one of these appeals soon. This article discusses the NLRB’s and courts’ positions from several recent cases involving class waivers in individual employment dispute agreements. It suggests how the courts and the Supreme Court should rule as well as the possibility of legislative action.
Monday, May 30, 2016
Admittedly, this title is somewhat hyperbolic, but hope beats eternal and last week the Seventh Circuit created a circuit split on the Horton question, which I've addressed before on this blog and in a co-authored article with Tim Glynn. And, full disclosure -- the two of us are among the signatories of an amicus brief before several courts of appeal.
Lewis v. Epic is well worth the read, but the Readers Digest version is that the court refused to enforce an agreement that precluded pursuit of class claims in either arbitration or court. The basis was the National Labor Relations Act's protection of workers' concerted actions for mutual aid and protection and its concomitant invalidation of agreements purporting to restrict that right. The prohibition of collective procedures in the arbitral tribunal "runs straight into the teeth of Section 7."
Nor did the FAA change that result. Epic argued that "even if the NLRA killed off the collective action waiver, the FAA resuscitates it," but the court didn't agree. Given that a court should try to reconcile potentially competing statutes, Epic faced a heavy burden in finding the FAA to trump the NLRB. Indeed, given the FAA's savings clause, which requires enforcing any contract "save upon such grounds as exist at law or in equity for the revocation of any contract," Judge Wood found no conflict at all between the two enactments.
Epic was circulated to the full Seventh Circuit, and no judge indicated a desire for en banc review. In normal circumstances, that would mean a petition for certiorari, but it seems unlikely than an understaffed Supreme Court will take the case. Presumably, the issue will continue to play out in the circuits that have not addressed the issue. In the meantime, however, the case has cast an epic uncertainty over waivers of collective or class relief in arbitration agreements.
Tuesday, May 17, 2016
Stacie Strong (Missouri) just sent an email to the ADR listserv describing an international labor/arbitration case. I'm reprinting here (with permission) the description of the case from her email:
A very interesting case, Suazo v. NCL (Bahamas), Ltd., was recently handed down by the U.S. Court of Appeals for the Eleventh Circuit. The case involved a cruise ship employee who was injured on the job and whose employment contract contained an arbitration agreement governed by the New York Convention and Chapter 2 of the Federal Arbitration Act. The question was whether the employee could bar arbitration by showing that high costs may prevent him from effectively vindicating his federal statutory rights in the arbitral forum.
The matter came up as part of a motion to compel arbitration, and the court held that "Our New York Convention precedent suggests (but does not hold) that a party may only raise this type of public-policy defense in opposition to a motion to enforce an arbitral award after arbitration has taken place, and not in order to defeat a motion to compel arbitration." This approach is, of course, problematic if one concludes that it will be difficult if not impossible to vindicate one's rights initially if one cannot afford to pursue the claim (here the court decided that the claimant had not made the appropriate showing, so the court was able to take a "no harm, no foul" perspective). However, the decision appears correct under the New York Convention.
Some might say that the advent of third party funding and availability of contingent fee attorneys in the United States would allow worthy claimants to assert their claims, but there is no guarantee that a third party funder or contingent fee attorney will take any particular case. While it is unclear how often this type of scenario will arise in the future, the case does identify a significant area of tension between domestic law and international law.
Saturday, May 14, 2016
The NY Times today described the increasing use of arbitration clauses for Silicon Valley and other similar start-up firms. This issue is nothing new to readers of this post, but it perhaps shows that even Silicon Valley isn't immune from broader workplace trends (although they certainly put a nicer spin on it). As always, the devil is likely in the details. Workers represented by experienced unions tend to fare well under arbitration systems, while individual employees--or those trying to form class actions--are far less likely to see the benefits of one-sided arbitration agreements. As the article notes, the Consumer Financial Protection Bureau is seeking new rules for commercial arbitration, but aside from the NLRB, there seems little that agencies are doing for employees.
Tuesday, April 26, 2016
Lisa Gelernter (SUNY-Buffalo, and a Bills fan) writes to share her take on the Second Circuit’s decision upholding the four-game suspension of Tom Brady of the Patriots for the deflate-gate scandal. [Side note: all the NFL's footballs are manufactured right here in Ada, Ohio -- come visit the factory, and ONU Law School, some time!]
I've cut-and-pasted Lisa's comments here:
The [Second Circuit] overturned the district court’s vacatur of what the parties (including the union) all characterized as an arbitrator’s award. The “arbitrator” in the case was NFL Commissioner Roger Goodell, who under the clear language of the collective bargaining agreement, was allowed to appoint himself as the hearing officer reviewing his decision to suspend Brady.
The Second Circuit’s opinion was totally consistent with the Supreme Court’s doctrine on the limited judicial review available for arbitration awards. The twist in this case is that the arbitrator was not a neutral party – Goodell was reviewing his own decision. The Second Circuit said that since the CBA specifically provided for this unusual review process, the court had to adhere to what the parties had agreed to. Although that seems right in the collective bargaining context when both parties are on somewhat equal footing in terms of bargaining power, hopefully that reasoning will not be carried over into consumer and employment arbitrations where the individual consumer or employee may not realize that he or she is “agreeing” to a partial arbitrator. After all, the Supreme Court has said that the reason that the FAA allows for enforcement of arbitration agreements is to allow for an alternative to litigation in court, which presumes some minimal level of procedural fairness and neutrality.
Tuesday, April 5, 2016
I had the pleasure of seeing Ted St. Antoine (Michigan - emeritus and former dean) speak at today's Ohio State Journal on Dispute Resolution's Schwartz Lecture on Dispute Resolution. His topic was Labor and Employment Arbitration Today: A Midlife Crisis or a New Golden Age? OSU Dean Alan Michaels gave an eloquent and heartfelt introduction in which he aptly praised Ted for mentoring and nurturing several generations of labor scholars and practitioners (and, true to form, Ted spent much of his lecture praising the empirical work of Alex Colvin).
I still have a handwritten note Ted sent me, when I was still in practice, congratulating me on my first publication. Ted is a terrific role model, and it was a special pleasure to see him again today.
Sunday, March 6, 2016
Since I tend to be foolishly optimistic, I've been wondering for a while (without actually putting in the effort to research the point) whether there's a silver lining to the current tendency to shuttle discrimination complaints to arbitration -- the possible inapplicability of statutory time limitations on bringing suits. Of course, Title VII doesn't have a traditional statute of limitations at all (i.e., a period measured from the accrual of the cause of action to the filing of a complaint in court), but rather has two separate temporal requirements that must be satisfied -- one (usually 300 days) for filing a charge with the EEOC and a second (90 days) for filing suit after receipt of a right to sue letter.
Under one paradigm (arbitrator subs in for the court to decide a case as a court would) the answer would be yes, but under another (arbitration is an alternative dispute resolution system subject to its own rules) the answer might be no. Plus, not only is the statutory language concerning pursuit of claims framed in terms of filing a "civil action" (which was not enough for the Court to find arbitration superseded) but arguably this whole structure is designed to filter disputes through a judicial process. That might mean that the procedural requirements are simply inapposite when arbitration is the dispute resolution procedure, which in turn might mean no statute of limitations at all for arbitration (the arbitrator could apply something like laches), and maybe no requirement at all of filing a charge with the EEOC.
Obviously, any movement along these lines would be employee-friendly, although it wouldn't address some of the serious problems of mandatory arbitration, including the typical clauses that foreclosing class claims in both court and arbitration.
The question came to mind in light of a case decided by the Second Circuit last August. The decision, Anthony v. Affiliated Computer Services, is less than definitive both because it is nonprecedential and because it arose in the context of an attack on an arbitration award. The arbitrator had found the plaintiff's claim under various antidiscrimination statutes barred by his failure to file for arbitration within 90 days of receipt of the EEOC's right to sue letter, and the Second Circuit upheld the award as not exceeding the arbitrator's authority. Less than a ringing endorsement of the decision and suggestive of the possibility that the court might also have upheld an award based on exactly the opposite reasoning.
But Anthony does raise the issue of what the right answer should be for arbitrators who are faced with this question.
Of course, silver linings in nature are transitory, and, even if arbitrators were to hold statutory procedures inapplicable in arbitration, employers are likely to add their own limitations periods to arbitration awards and, given the Supreme Court's sweeping readings of the FAA, those are likely to be upheld under current law.
Wednesday, February 24, 2016
Rafaeol Gely (Missouri-Columbia) writes to announce the launch of ArbitrationInfo.com. Here's a description:
The Center for the Study of Dispute Resolution at the University of Missouri School of Law (CSDR) is delighted to announce the launching of ArbitrationInfo.com. In 2014, faculty at the CSDR and the National Academy of Arbitrators (NAA) began conversations about a possible collaboration on a website that would provide information about labor arbitration. Leadership of the NAA, founded in 1947 as a nonprofit honorary and professional organization of arbitrators in the United States and Canada, was concerned about the manner in which labor arbitration and the arbitration process were being portrayed in the media. With the expansion of the use of arbitration outside the labor area, particularly in consumer and employment disputes, negative descriptions of the process in the media had reached an alarming level. While some of the criticism in these other areas was, and continues to be justified, the NAA feared that such criticism could have a delegitimizing effect with regard to labor arbitration. Our initial conversations led us to believe that in part some of the press that arbitration was receiving was due to misunderstandings and misinformation about the different contexts in which arbitration was used and the various types of arbitration.
The website addresses these concerns by providing the public, professionals and the media with a neutral, noncommercial and comprehensive source of information about arbitration. It includes an Arbitration 101 page, which serves as a primer on the arbitration process. In addition, the site features a list of press contacts who are available to talk to members of the media about arbitration. The website is managed by an editorial board composed of members of the NAA and faculty at the CSDR. Students at the School of Law have the opportunity to develop content for and help maintain the website, in collaboration with distinguished members of the NAA. Unlike other arbitration-related websites, ArbitrationInfo.com doesn’t generate or funnel business to a particular arbitrator or an arbitration practice group.
Saturday, February 20, 2016
A recent article in The Economist, The big fight, notes that European companies are far ahead of American companies in developing dispute esolution systems for consumer disputes, especially in online ADR. I think a good case can be made that SCOTUS's pro-arbitration line of cases -- especially those that all but extinguish consumer class actions -- have removed the incentive for American companies to invest in developing effective dispute-resolution programs. As a result, American companies risk falling yet farther behind their European competitors.
Here's some key language from the article in The Economist:
The more consumer-friendly stance [of European companies] did not just evolve in the courts but was to a large degree the result of a decision y the European Commission more than 20 years ago to make all small print subject to being examined and potentially overturned by the courts.... The most recent [directive] gives a shot in the arm to ADR, by for instance forcing businesses to inform consumers of their dispute-resolution options.... Firms won't be forced to sign up to an ADR scheme, but eh hope is that most will feel obliged to as the directive takes hold.
Europe also leads the way in developing online mechanisms for mediating the millions of cross-border e-commerce disputes that arise each year.
Monday, February 15, 2016
Stacie Strong (Missouri) posted this to the ADR profs listserv. I am cross-posting it here with her permission:
As some of you may know, another case involving class waivers in the employment/labor context was heard Friday by the Seventh Circuit. The case, Lewis v. Epic Systems, Inc. (No. 15-2997) (here's the district court opinion), saw the National Labor Relations Board (NLRB) filing an amicus brief. While it is unclear how the Seventh Circuit will rule in this instance, it would seem that the Supreme Court will soon need to address this issue, either to resolve the split between agency (NLRB) determinations on the proper reading of the National Labor Relations Act and various federal court rulings (if the Seventh Circuit follows the approach used by other federal courts since the D.R. Horton case), or between different federal courts (if the Seventh Circuit adopts the NLRB approach).
Thursday, February 4, 2016
Lise Gelernter (SUNY-Buffalo) sends word of a recent Fourth Circuit consumer arbitration decision with important implications for employment arbitration and the waiver of substantive rights through arbitration generally. Apart from the second paragraph below, which I added, what follows in entirely Lise's analysis:
A recent Fourth Circuit consumer arbitration decision has an interesting discussion on arbitration agreement enforceability that has implications for the employment and labor arbitration arenas. Hayes v. Delbert Services, Docket No. 15-1170 (4th Cir. 2/2/16).
Western Sky was an online lender owned by Martin Webb. Webb was a member of the Cheyenne River Sioux Tribe, and Western Sky's offices were located on the Cheyenne River Indian Reservation in South Dakota. From its base on the Reservation, Western Sky issued payday loans to consumers across the country. Named Plaintiff James Hayes took a loan from Western Sky for about $2500 and an annual interest rate of 140% . Over the four-year life of Hayes's loan he would have paid more than $14,000. Western Sky all but conceded in the litigation that its loan practices violated a wide variety of federal and state laws.
The loan agreements contained an arbitration clause that stated:
This Loan Agreement is subject solely to the exclusive laws and jurisdiction of the Cheyenne River Sioux Tribe, Cheyenne River Indian Reservation. By executing this Loan Agreement, you, the borrower, hereby acknowledge and consent to be bound to the terms of this Loan Agreement, consent to the sole subject matter and personal jurisdiction of the Cheyenne River Sioux Tribal Court, and that no other state or federal law or regulation shall apply to this Loan Agreement, its enforcement or interpretation.
(emphasis added). The loan agreement also stated: “Neither this Agreement nor Lender is subject to the laws of any state of the United States of America.”
The loan agreement’s arbitration agreement required the arbitration of any disputes related to the loan or its servicing and stated that the arbitration proceedings shall be “conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative in accordance with its consumer dispute rules and the terms of this Agreement.” The version of the agreement at issue in the case also provided that a party “shall have the right to select” the AAA or JAMS, or another group to “administer the arbitration.” The arbitration clauses also provided that the agreement
IS MADE PURSUANT TO A TRANSACTION INVOLVING THE INDIAN COMMERCE CLAUSE OF THE CONSTITUTION OF THE UNITED STATES OF AMERICA, AND SHALL BE GOVERNED BY THE LAW OF THE CHEYENNE RIVER SIOUX TRIBE. The arbitrator will apply the laws of the Cheyenne River Sioux Tribal Nation and the terms of this Agreement.
The agreement also prohibited the arbitrator from applying “any law other than the law of the Cheyenne River Sioux Tribe of Indians to this Agreement.”
After finding that Delbert was not a tribal entity, the Fourth Circuit ruled that the arbitration agreement was unenforceable because it “fails for the fundamental reason that it purports to renounce wholesale the application of any federal law to the plaintiffs’ federal claims.” The court recognized that the Supreme Court has found choice of law provisions and waivers of certain rights, such as class actions, to be enforceable, but distinguished the Delbert case because it violated the Supreme Court’s ruling that arbitration waivers that blocked “a party’s right to pursue statutory remedies” were not enforceable. The court stated: “a party may not underhandedly convert a choice of law clause into a choice of no law clause -- it may not flatly and categorically renounce the authority of the federal statutes to which it is and must remain subject.”
This appears to be a pretty extreme case of a waiver. In the employment and labor arena, the Fourth Circuit’s reasoning might have some play if there is an arbitration clause that appears to effectively waive all the rights of a party under an otherwise applicable law, such as Title VII or the FLSA. But the Fourth Circuit made it clear that it considers the Supreme Court’s decisions in ATT v. Concepcion and Italian Colors to limit that inquiry by embracing the enforceability of waivers of certain procedural or attendant rights, such as class actions, that merely make it more difficult or costly to pursue a federal remedy.
Wednesday, December 16, 2015
Lise Gelernter of Buffalo sent out the following to the National Academy of Arbitrators listserv. Although DirectTV is a consumer case, she thought it might be of interest to us employment types.
The Supreme Court just decided another consumer-related arbitration case (copy attached) -- DirecTV v. Imburgia. In this case, the Court considered a class-action waiver in a 2007 contract that customers had with DirecTV in California. The contract waived access to class action arbitration, EXCEPT " 'if the law of your state' does not permit agreements barring class arbitration, then the entire agreement to arbitrate becomes unenforceable." (Quoting from Justice Ginsburg's dissent).
The California Court of Appeal held that the "law of your state" language meant state law regardless of whether it was later preempted by the FAA (as it was in the Concepcion case). Since California law ruled out the banning of class arbitrations, the California court had held that the clause was unenforceable in California.
The majority didn't buy it, in a 6-3 decision written by Justice Breyer. Justice Thomas dissented on the basis that he does not believe that the FAA is applicable in state court. Justice Ginsburg wrote another dissent, joined by Justice Sotomayor, in which she said the California court had correctly interpreted the clause and the meaning of the term "law of your state."
It's an interesting lineup -- in the Concepcion case, Scalia wrote the 5-4 decision, joined by Roberts, Alito, Kennedy and Thomas. Breyer wrote the dissent in Concepcion, joined by Sotomayor, Ginsburg and Kagan. In contrast, in the DirecTV case, Breyer wrote the majority 6-3 decision, joined by the same judges as in the Concepcion majority, except for Thomas, with the addition of Kagan. It looks like Breyer and Kagan, although they dissented in Concepcion case, decided that parties had to adhere to Concepcion as the law of the land.
In an interesting twist, DirecTV is now owned by AT&T, the company in the Concepcion case.
Keep in mind that class action arbitration is still a possibility in restricted circumstances, even under the recent Supreme Court apparent expansion of FAA preemption. In Oxford Health Plans v. Sutter, 133 S. Ct 2064 (2013), the Supreme Court refused to vacate an arbitrator's decision that had construed ambiguous language in a contract to permit class action arbitrations. However, many corporations rewrote their arbitration clauses after Concepcion to be very unambiguous about prohibiting class arbitrations.
And I could add, from the employment side, that the NLRB's Horton rule is still being heavily litigated in the courts, although we have yet to see a circuit court decision upholding the principle that an agreement waiving all right to class relief violates the NLRA and Norris LaGuardia.
Saturday, October 31, 2015
This is old news for most readers of this blog, but it's nice to see a paper like the New York Times highlight the issue of arbitration waivers. In particular, an article today talks about the Supreme Court's approval of arbitration class action waivers, including some backstory of the Italian Colors restaurant.
Friday, October 2, 2015
I'm cross-posting here Imre Szalai's email out to the ADR Listserv:
Today, the Supreme Court granted cert in yet another FAA case. In this
new case, MHN Government Services v. Zaborowski, the Supreme Court will have to deal with the broad scope of FAA preemption as set forth in
Concepción is much more than a class action case. The preemption doctrine
from Concepción is changing how lower courts treat unconscionability
arguments in connection with individual, non-class disputes. Judicial
review of arbitration agreements for fundamental fairness is shrinking and
more circumscribed as a result of Concepción (and as a result of other
cases like American Express and Rent-A-Center), which I find troubling,
especially in the consumer and employee contexts.
I plan to file an amicus brief supporting the employees in this case. I
plan to criticize Concepción’s overly broad preemption doctrine, and I
also plan to critique the application of the FAA to the employment
setting. I have uncovered historical evidence that was unknown at the
time Circuit City was decided in 2001, when the Supreme Court held that
the FAA applies to employment disputes. This evidence confirms that the
FAA was never intended to apply in the employment setting, and I want to
bring this new historical research to the Court’s attention in the
If you are interested in the amicus brief, please contact [Imre].
The new historical evidence Imre refers to is hot -- a complete game-changer, if SCOTUS is willing to admit it got Gilmer and Southland wrong. Stay tuned!
Thursday, October 1, 2015
Gary Spitko (Santa Clara) has just posted on SSRN his article (just published -- 20 Harv. Nego. L. Rev. 1 (2015)) Federal Arbitration Act Preemption of State Public-Policy-Based Employment Arbitration Doctrine: An Autopsy and an Argument for Federal Agency Oversight. Here's the abstract:
This article examines the negative impact that the U.S. Supreme Court’s recent jurisprudence interpreting the Federal Arbitration Act (“FAA”) will have on the ability of states to promote the public interests that ground state employment regulation and argues for a reordering of the relationship between federal arbitration law and state public-policy-based employment arbitration doctrine. The article proceeds in three steps. First, the article demonstrates that the U.S. Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion and 2013 decision in American Express Co. v. Italian Colors Restaurant together extinguish the state effective-vindication and public policy exceptions to FAA application. In doing so, this case law preempts a significant amount of state employment arbitration regulation and, thus, enables employers to use employment arbitration agreements imposed on employees as a condition of employment as a means to evade the strictures of state employment regulation. Second, the article argues that, as a normative matter, the FAA should allow for consideration of the public interest in determining whether an employment arbitration agreement will be enforceable. Thus, in practice, the FAA should allow for consideration of the need for a worker to effectively vindicate her state statutory employment rights and for consideration of her ability to do so in arbitration. Finally, the article suggests a way forward. Specifically, the article proposes that Congress limit the FAA’s preemptive scope by carving out an exception to section 2 of the FAA that would allow states to regulate predispute employment arbitration agreements subject to the approval of the U.S. Department of Labor or a similar body. Pursuant to this reform, a state would be authorized to propose employment arbitration regulations tailored to the specifics of that state’s employment statutes. A federal overseer with expertise in employment law would be charged, however, with evaluating any such proposed employment arbitration regulation by balancing the federal interest in promoting arbitration agreements as written with the state interest in vindicating state statutory employment rights.
Monday, January 26, 2015
Loyal readers are familiar with my (if not necessarily appreciative of) obsession with the Horton principle (which, by the way, is getting another rub at the courts in the Second Circuit). Those similarly afflicted (or maybe just interested in Chevron deference to the National Labor Relations Board decisions) will find interesting a recent student Note, Deference and the Federal Arbitration Act, 128 Harv. L. Rev. 907 (2015)
Written by Brett Kalikow, it argues that the Board's decision as to whether concerted action is a substantive right under the NLRA is entitled to deference. While recognizing that deference is not due where an agency interprets a statute outside its domain (like the FAA), the cases make clear that the FAA cannot require any waiver of substantive rights. And the Note contends that, therefore, Board interpretations that rights under the NLRA are substantive may nevertheless dictate the outcome:
This Note argues that deference is also warranted for the Board’s finding that the NLRA provides employees with a substantive statutory right to pursue legal claims collectively, which would render the arbitration agreements waiving that right unenforceable under the FAA. Although most of the Board’s discussion of the FAA is not entitled to deference, the Board’s finding that concerted legal activity is a substantive right under the NLRA is different. That determination is based on the NLRB’s interpretation of the nature of the rights guaranteed by the NLRA, the statute it administers, and therefore Chevron deference applies.
Needless to say, I'm persuaded -- although I'm a pretty easy sell when it comes to Horton!
Wednesday, October 29, 2014
Although the Fifth Circuit tried to put a stake in the heart of the NLRB's Horton decision, the Board confirmed its vitality today in its opinion in Murphy Oil U.S.A. The bottom line: the NLRB "reaffirmed the D.R. Horton rationale and applied it to find that the employer violated section 8(a)(1) of the NLRA "by requiring its employees to agree to resolve all employment-related claims through individual arbitration" and by trying "to enforce the unlawful agreements in Federal district court" when employees filed a collective action against the company under the FLSA.
Tim Glynn and I have written about the issue before, and I've blogged about it on Workplace Prof , so I won't belabor the point. Suffice it to say that, although Horton has to date not been well-received outside of the Board and the law reviews, the jury is still out on whether the NLRA bars employers from foreclosing any kind of concerted action in a court or arbitral forum. Indeed, there's an appeal before the Second Circuit which will provide another opportunity for the viability of the theory to be tested.
Wednesday, August 27, 2014
Barry Winograd sends word that:
the Board of Governors of the National Academy of Arbitrators has approved a set of Guidelines for professional standards for arbitrators in mandatory employment arbitration proceedings. The Guidelines were developed over a two year period by a special Academy committee of a dozen members. The committee was chaired by Professor Theodore J. St. Antoine.
From a review, you will see that the Guidelines improve upon current arbitration rules and ethical standards for mandatory employment arbitration cases. Topics that are covered include limits on the source of an arbitrator's appointment, initial and continuing disclosure obligations, arbitrator disqualification, prehearing discovery, prohibited ex parte communications, monetary deposits, addressing issues of public law, and post-award clarification of a decision. It is anticipated that the Guidelines will be helpful in promoting heightened standards of professional responsibility in a manner that will be fair and of benefit for both claimants and respondents in the field.
Friday, August 8, 2014
A new piece by Jonathan R. Harkavy, Class Action Waivers in Title VII Cases after Italian Colors: Sidestepping the Individual Arbitration Mandate, recently posted on SSRN:
The Supreme Court ruled in American Express Co. v. Italian Colors Restaurant, 570 U.S. -- 186 L. Ed. 2d 417, 133 S. Ct. 2403 (2013), that class action waivers ordinarily must be enforced under the Federal Arbitration Act even when the cost of an arbitration exceeds a claimant's potential recovery. This essay suggests, however, that employee waivers of class treatment in arbitrations are not appropriate for claims under Title VII of the Civil Rights Act of 1964 because of enforcement provisions unique to that statute. Because Congress has effectively set its legislative face against limits on employee access to class treatment, employee class treatment waivers are unenforceable as to Title VII status discrimination and retaliation claims.
The article focuses on a number of provision in Title VII that the author argues show a commitment to judicial enforcement that the Court found absent in the Sherman Act in Italian Colors. These provisions are also largely absent from the ADEA, which draws its enforcement scheme from the FLSA, so the Gilmer decision doesn't, in theory at least, foreclose the argument.
As someone who has railed unsuccssfully against the arbitration tide in the past, I wish the argument luck without being super optimistic about its success!
Friday, August 1, 2014
False Claims Act suits come in two flavors – those brought by “relators” on behalf of the United States to recover for harm caused by false or fraudulent submission of claims to the government and retaliation suits seeking damages as the result of adverse employment actions resulting from plaintiff’s whistleblowing activity. 31 U.S.C. § 3730(h)(1). Of course, relators are typically, although not always, employees of the defendant since such persons are usually best positioned to know about fraudulent claims. And, of course, both kinds of claims can be, and often are, brought in the same action.
Where, if at all, does arbitration fit into this structure? A recent case raised, but did not exactly resolve, the question. United States ex rel. Paige v. BAE Sys. Tech., 2014 U.S. App. LEXIS 9676, 9-12 (6th Cir. May 22, 2014), involved an effort by defendant to shunt an FCA retaliation claim into arbitration. The Sixth Circuit refused to do so because the employment contract in question provided only for arbitral resolution of claims arising under that agreement. The FCA “is purely statutory and exists independent of the Agreement.” While the FCA bars retaliation with respect to “"terms and conditions of employment," it is not limited to breach of any given employment contract. Thus, the arbitration clause simply did not reach the FCA claim at bar.
If employment law teaches us anything, however, it is that employers are adept at responding to limiting judicial constuctions of the language of their agreements with workers, and we can be confident that, unlike the agreement in BAE, future arbitration agreements will explicitly require the arbitration of FCA claims. In fact, BAE’s form was odd because it did not refer to statutory claims at all, and the Sixth Circuit provided examples of language that apparently would reach such claims.
What happens when such clauses are written to embrace FCA claims? Although a district court opinion in 2000 found such a clause invalid, Nguyen v. City of Cleveland, 121 F. Supp. 2d 643, 647 (N.D. Ohio 2000), more recent authority – in line with the Supreme Court’s enshrinement of the Federal Arbitration Act as a “superstatute”-- goes the other way. For example, United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 381 (4th Cir. 2008), rejected the argument that the FCA barred waiver of rights to bring suit in federal court.
Both BAE and Kellogg Brown & Root involved FCA retaliation claims. In such cases the plaintiff is not merely a relator but, instead or in addition, is suing on his own behalf. Even assuming that the FAA permits employees to agree to arbitrate their own claims, would an agreement to arbitrate (if broadly enough framed) bar court suit by the employee acting as a relator?
This is a much more problematic scenario, both pragmatically and legally. Practically speaking, the FCA’s procedures cut against arbitration but probably don’t preclude it: a relator must file her complaint under seal, and the period of nondisclosure (in theory 60 days but almost always extended far longer, sometimes years) allows the Department of Justice to decide whether to intervene to pursue the litigation itself. Thus, the normal motion to stay a suit pending arbitration is not a good fit with this somewhat unusual procedure and filing for arbitration before bringing a qui tam suit might trigger the FCA’s public disclosure bar. See United States ex rel. Cassaday v. KBR, Inc., 590 F. Supp. 2d 850 (S.D. Tex. 2008). Further, should the DoJ in fact intervene, the suit becomes not only in name but also in reality one prosecuted by the government. It would seem that the original relator’s agreement to arbitrate, if not simply irrelevant at this point, could not limit the federal government’s right to proceed. EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) (individual employee’s arbitration agreement could not limit EEOC’s right to seek victim-specific relief for such an individual).
But what if Justice chooses not to intervene? In that case, the original relator (who, by hypothesis agreed to arbitrate all claims against the defendant) could be faced with a motion to stay pending arbitration, and the court would have to confront the conceptual objection. Put simply, that is that the government (represented by the relator) can’t be bound by an agreement entered into by the relator in her private capacity. And an FCA suit is not merely in the name of the government: even when the DoJ does not intervene, the bulk of any judgment will go to the United States Treasury and any settlement with the defendant requires Justice approval.
Some analogies cut in this direction. For example, an employee cannot waive his or her right to report legal violations to the government. Any agreement to do so is null and void. E.g., EEOC v. Frank's Nursery & Crafts, Inc., 177 F.3d 448 (6th Cir. 1999).
But perhaps the closest parallel to the FCA situation came recently out of the California Supreme Court. Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (Cal. 2014), held that, while employees could agree to arbitrate their individual claims, they could not waive their right to bring a “representative action” under the state’s Private Attorneys General Act of 2004. Like the FCA, PAGA “authorizes an employee to bring an action for civil penalties on behalf of the state against his or her employer.” In this case for Labor Code violations. Again like the FCA, most of the proceeds of that litigation going to the state. The court held that an “arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”
While Iskanian involved a federalism question absent where the FCA is concerned – whether the FAA deprived California of the power to deputize employees to prosecute Labor Code violations on the state's behalf – the result seems correct and applicable to the FCA. Despite those problems, a recent district court decision in the FCA context held in favor of arbitration. Deck v. Miami Jacobs Bus. College Co., 2013 U.S. Dist. LEXIS 14845 (S.D. Ohio Jan. 31, 2013). Contra Mikes v. Strauss, 889 F. Supp. 746 (S.D.N.Y. 1995) (dicta suggesting that the plaintiff, as relator, stands as a private representative of the government and, since the government was not a party to any arbitration agreement, a plaintiff, suing on the government's behalf is not bound).
Assuming that FCA claims per se are not arbitrable but retaliation claims are, courts will have to struggle with questions of preclusion. The two claims in the two fora are almost certain to overlap, and, should the relator proceed with the arbitration (or the defendant move to compel arbitration), the arbitral award will almost always be issued before a court decision. Is it issue preclusive? A fascinating question for civil procedure buffs, but well beyond the scope of this post. FWIW, my instinct is that preclusion shouldn’t work. But, especially when it comes to arbitration’s reach, I’ve been wrong before!
Thanks to Angela Raleigh, Seton Hall class of 2016, for her help on this.